Airlaw v Leda

[2003] NSWSC 528

CITATION:	Airlaw v Leda [2003] NSWSC 528
HEARING DATE(S):	11/06/03
JUDGMENT DATE:	12 June 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Master Macready at 1
DECISION:	I order that the statutory demand dated 28 February 2003 served by the defendant on the plaintiff be varied by reducing the amount to $13,068.29 to take effect as and from twenty-one days from the date of service of the demand.
CATCHWORDS:	Corporations Law. Application to set aside statutory demand under s 459G of the Corporations Act. Demand varied. No matter of principle.
PARTIES :	Airlaw Pty Limited v Leda Holdings Pty Limited
FILE NUMBER(S):	SC 1993/03
COUNSEL:	Mr C. Ward for plaintiff Mr J.R.J. Lockhart for defendant
SOLICITORS:	Lane & Lane for plaintiff John Meggitt for defendant

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MASTER MACREADY

THURSDAY 12 JUNE 2003

1993/03 - AIRLAW PTY LIMITED v LEDA HOLDINGS PTY LIMITED

JUDGMENT

1 MASTER: This is an application to set aside a statutory demand served by the defendant on the plaintiff dated 28 February 2003 claiming an amount of $70,529.66 in respect of electricity charges and outgoings in pursuance of a lease between the plaintiff as lessee and the defendant as lessor.

2 There has been paid since the issue of the demand a sum of $41,879.03 to cover electricity costs, leaving a balance of $28,650.63.

3 The defendant, for the purposes of this application, only concedes there may be a genuine dispute in respect of certain outgoings and charges within the terms of the lease. Accordingly, it does not press the amount demanded in respect of the amount chargeable under the lease to the plaintiff in respect of those outgoings to the extent of $1,692.88.

4 The particular amounts are identified in a copy of BG1 and BG2, which I will mark as exhibit 5. There is thus a claimed amount of $26,957.75 subject apparently to some questions of interest.

5 The genuine dispute concerns the charging to the plaintiff of outgoings in respect of an industrial lease. The plaintiff has a lease of part of the blocks owned by the defendant and an appropriate proportion of the outgoings are those charged to the plaintiff.

6 This is provided for in clause 4.3(b) of the lease which is in the following terms:

“Outgoings and other costs


(a) Lessee’s proportion of outgoings: The Lessee must pay to the Lessor the Lessee’s Proportion of Outgoings for each year ending on the date the Lessor from time to time nominates in writing (in this clause defined as ‘year’), or proportionately for any applicable part of a year.

(b) Meaning of outgoings: ‘Outgoings’ means all rates, taxes, assessments, charges, duties, expense, fees, levies, outgoings and other costs of the Lessor paid or payable in respect of the Land (irrespective of its ownership) and, without limit, includes:


(1) rates and taxes: all rates, taxes (including, without limit, land tax calculated on a single holding basis and on the basis that the Land is not subject to any special trust) assessments, charges, duties (including any State or Federal duties and taxes on deposits or financial institutions) fees, impositions and levies of any government, statutory or other competent authority in respect of the Land, services to the Land or the money derived by the Lessor from the Land;

(2) water charges: all costs in respect of water, sewerage and drainage (including, without limit, meter rents and environmental levies);

(3) insurance: all costs in respect of insurance relating to the Land (including, without limit, public liability, consequential and economic loss, machinery breakdown, loss of rents insurance and insurance of the improvements forming part of the Land but only to the extent of their full insurable reinstatement value);

(4) management: all reasonable costs (including, without limit, wages) for the management, control and administration of the Land;

(5) services: all costs in respect of providing, operating, supplying, maintaining, repairing and replacing all services or amenities from time to time provided by the Lessor for lessees and licensees of the Land (including, without limit, any plant and equipment required for the services, pest control and gardening and landscaping);

(6) power: all costs for lighting, power, air conditioning and heating incurred in connection with the Land;

(7) repairs: all costs of general repairs, up-keep and maintenance of the Land; and

(8) cleaning: all costs of cleaning and removing rubbish and waste from the Land (including without limit, any licence or permit for disposal of rubbish and waste).

‘Outgoings’ does not include:

(9) any costs of cleaning any part of the Land occupied by a lessee or licensee,

(10) any commission or similar charge payable in letting or licensing any part of the land,

(11) any payment for which a particular lessee or licensee is directly responsible,

(12) the cost of any structural work, or

(13) the Lessor’s income tax or capital gains tax.

(c) Method of payment of outgoings; The Lessee’s Proportion of Outgoings is payable as follows:

(1) Before or as soon as practical after the commencement of each year (as defined in submission-clause (a)), the Lessor must provide to the Lessee a written estimate of the Outgoings for that year and the Lessee’s Proportion of that estimate (calculated as monthly instalments).
(2) On the 1st of each month after the provision of the Lessor’s estimate, the Lessee must pay to the Lessor its monthly instalment of the Lessee’s Proportion of the Outgoings estimated by the Lessor for that year.
(3) Where the Lessor fails under paragraph (1) to provide an estimate before the commencement of a year, the Lessee must, within FOURTEEN (14) days after the Lessor provides the estimate, pay to the Lessor the aggregate of the monthly instalments of the Lessee’s Proportion of the estimated Outgoings for the period from the commencement of the particular year to the end of the month during which the estimate is provided.

(d) Lessor to provide statement of outgoings:

(1) As soon as may be convenient after the end of each year referred to in submission-clause (c)(1), the Lessor must give to the Lessee a written statement of the Lessee’s Proportion of the actual Outgoings for the year just ended, compared with the estimate previously notified to the Lessee.

(2) If the amount paid by the Lessee to the Lessor for the relevant year is:

(A) less than the Lessee’s Proportion of the actual Outgoings for that year, the Lessee must pay the difference to the Lessor within FOURTEEN (14) days of the date of the statement being given under paragraph (1); or

(B) more than the Lessee’s Proportion of the actual Outgoings for that year, the excess may be either retained by the Lessor as a payment in advance of the Lessee’s Proportion of Outgoings for the next year or must be promptly credited (or, if this Lease has expired and no lease for a further term has been granted, paid) to the Lessee.

(e) Services to premises: The Lessee must pay to the Lessor any proper assessment received by the Lessor for trade waste, excess water or other costs incurred as a result of the Lessee’s particular use or occupation of the Premises and the Lessor’s reasonable costs and expenses (if any) in operating, repairing and maintaining the services and facilities specified in Part A of the Second Schedule.”

7 As can be seen from clause 4.3(c) there is provision for payment of a budget amount. This procedure was not adopted in respect of the year ended 30 June 2001, but was adopted for the next year when the budget was submitted on 25 October 2002. The plaintiff paid the amount of the budget from December 2002, but the amount for July to November 2002 of $9078.80 has not been paid and is included in the demand.

8 The remaining items in the demand relate to pre-30 June 2002 outgoings.

9 I have had the benefit of having a number of submissions in respect of the principles to be applied, and I think the most useful summation of what a genuine dispute is, is that given by McLelland CJ in EQ in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669, where at 671 his Honour made the following comments in respect of the expression “genuine dispute”:

“It is however, necessary to consider the meaning of the expression ‘genuine dispute’ where it occurs in s.459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of consideration as the ‘serious question to be tried’ criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit ‘however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be’ not having ‘sufficient prima facie plausibility to merit further investigation ass to (its) truth’ (cf Eng Mee Yong v Letchumanan (1980) APPLICANT 331 at 341), or ‘a patently feeble legal argument, or an assertion of facts unsupported by evidence’ (cf South Australia v Wall (1980) 24 SASR 189 at 194).
But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3:
‘These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.’
In Re Morris Catering (Australia) Pty Limited (1993) 1 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said:

‘There is little doubt that Division 3 ... prescribes a formula that requires the Court to assess the position between the parties, and preserve demands where it can be seen that there is on genuine dispute and no sufficient genuine offsetting claim. That is not to say that the Court will examine the merits or settle the dispute. The specified limits of the Court’s examination are the ascertainment of whether there is a ‘genuine dispute’ and whether there is a ‘genuine claim’.


It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the Court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.

The essential task is relatively simple – to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).’

I respectfully agree with those statements.”

10 I turn to the different areas of dispute and first deal with the budget amount of $9078.80. The scheme of the lease in clauses 4.3(c) and (d) clearly bring into effect a legally enforceable obligation to pay the amount of the monthly estimate. At the end of the year there is a process of adjustment. If the lease has been terminated, the excess may be refunded to the tenant. If it is not, it is credited towards next year’s outgoings.

11 The plaintiff suggested that the budget was predicated on the year ended 30 June 2002 actuals and as they were challenged, then the foundation for the budget was undermined. A reference to the actuals for the year ended 30 June 2002 and the budget does not demonstrate this assertion. See in particular the documents at pages 9-13 of the affidavit of Mr Gayler of 15 May 2003.

12 Although there are challenges to the outgoings charged for 2002, the amount of those challenges would not lead to any possible inference that the budget had not been put forward in good faith and in conformity with the lease. There is no other evidence before me to demonstrate any lack of good faith in putting forward the budget. Given those facts, it seems to me there is no genuine dispute in respect of this amount.

13 As to the balance of the amount, the plaintiff raises a number of different complaints. Apart from general complaints about the lack of provision of information, it does not raise particular complaints as to amounts totalling $2844.26, which are set out at BG1 to Mr Gayler’s affidavit.

14 As to the amounts totalling $10,715.05, identified in BG1 and BG2, it raises queries in respect of those items. As to amounts totalling $3174.41, the plaintiff originally stated that it did not have sufficient information to determine whether the charges were properly made. It later received information and articulated some challenges. There does not appear to be a right given to the plaintiff under the lease to receive evidence supporting a charge for outgoings from the defendant.

15 Clause 3(d)(1) only requires a written statement. There can thus be no breach by the lessor of the clause which could give rise to an offsetting claim.

16 I turn to the question of the outgoings generally. The plaintiff pointed to a number of matters in clause 4.3(b) in relation to the construction of the lease. There is an express exclusion of certain matters and in particular under subparagraph (11) there is an exclusion of any payment for which a particular lessee or licensee is directly responsible.

17 If one goes to the lease and paragraph 6, one finds a number of specific obligations as to the lessee to keep the premises in good order, repair and condition. In clause 6.4 there are specific obligations in relation to repairs and maintenance. For instance, cleaning of the premises, removing rubbish, replacing broken glass, repairing of fittings, plumbing facilities and matters of that nature. Importantly, under clause 6.5 it is apparent that the lessor might provide the cleaning services to the premises in which case the lessee has to pay the lessor’s costs of providing cleaning services for the premises.

18 Another matter to which the plaintiff pointed in the construction of the lease is subclause (12) which excludes from outgoings the cost of any structural work. In the affidavits there was articulated complaints relating to capital, but it is clear that the proper construction relates in this respect to what might be structural works.

19 If one looks, for instance, at some of the entries, say the second entry for 31 December 2001, which is apparent from BG1, this appears to be roof leaks and repairs to the roof, downpipe flashings and other matters. Certainly one would not describe those, for instance, as structural, and as they are not on the premises of the plaintiff, the real question must arise as to whether they may be within the tenant’s obligation to keep in good repair.

20 If one, for instance, looks at the fourth item of 31 December 2001, one sees a reference to making an additional egress into the electricity substation. If the substation is a substantial building, one may have some argument that that might be a structural repair.

21 The lessee’s view of the construction of the lease was communicated to the defendant at a meeting which was held to discuss these matters on 26 March 2003 and it is plain from the discussions at that meeting, that the defendant’s officers did not accept what I would consider an obvious construction put forward by the plaintiff at that meeting.

22 It has in fact taken a slightly different stance now as it concedes, as I have earlier said, merely for the purposes of this application, that there may be a genuine dispute in respect of some of these matters.

23 It seems to me that this at least indicates that the attitude which finds itself reflected in BG1 and BG2 might be a reflection of the attitude expressed at that meeting. There is evidence from the plaintiff that shows that some charges do not relate to their premises and, to some extent, relate to another tenant’s premises.

24 Sometimes the amount of the charge itself, I suggest, such as lawn mowing and rubbish removal, demonstrates there is a substantial probability they include the amounts charged for other tenants.

25 There were 49 items originally disputed in BG1 and BG2, of which 41 remain in dispute. The resolution of such matters in a dispute of this kind is not appropriate. As Young J said in John Holland Construction and Engineering Pty Limited v Kilpatrick Green Pty Limited (1994) 14 ACSR 250:

“It may be that it is far more appropriate in the instant sort of case for the Court to just take a broad brush approach. Thus the Court might just say that because this is not a debt collecting court, where there is a construction case of this nature, the demand should be set aside ... whenever it can be seen from the correspondence that there are honestly held views on either side which have brought a dispute between the parties. Thus, the matter can be dealt with in the ordinary way in which construction disputes are dealt with without the time and expense that is involved in running this sort of litigation ahead of that dispute.”

26 The plaintiff flagged its position at an early stage by writing a complaint to the defendant as to the charges, and also met with the defendant in an effort to resolve the matter.

27 Accordingly, I am satisfied that there is a genuine dispute as to the amount of $13,889.46. This makes the substantiated amount $13,068.29.

28 There is a claim that the demand was defective in that on the defendant’s own evidence it misstates the amount claimed. Such a defect can only lead to the setting aside of the demand if there is demonstrated a substantial injustice. None has been identified or proved by evidence and this claim must fail.

29 Accordingly, I order that the statutory demand dated 28 February 2003 served by the defendant on the plaintiff be varied by reducing the amount to $13,068.29 to take effect as and from twenty-one days from the date of service of the demand. I will hear argument on costs.

(Counsel addressed on the question of costs)

30 I have heard argument in respect of costs. There are a number of matters to be observed. There was an issue that occupied a fair bit of the hearing time which related to the gross lettable area question and I decided that such evidence could not be received because an affidavit was outside the twenty-one days. It is obvious from the evidence that involved quite a lot of affidavit material and the plaintiff lost on that aspect. When the matter went on the first amount had been reduced shortly after the commencement of the proceedings to $26,000 and the plaintiff was only partially successful in respect of the ultimate result.

31 If it were not for the fact of the question of the gross lettable area I would have thought the plaintiff should receive a proportion of its costs. However, having regard to the gross lettable area question, and in order to save difficulties for the assessment of taxation, it seems to me that the appropriate order is that there be no order as to costs, and that each party bear its and their own costs and I so order. The exhibits may be returned.

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Last Modified: 06/18/2003